Thursday, August 29, 2013

"India might buy gold from citizens to ease rupee crisis"

$1411.70 last, up six nine bucks from the day's low.

We've been amazed by the Indian precious metals market for some years now. From 2007's "EU Emission Caps, Kyoto and Three Ancient Civilizations":
...As a side note, in December 1979, as silver was making its historic run, an old Jewish trader told me he was lightening up on Ag.

When I asked why he said "I hear the Indian ladies are taking their bracelets off and they've been trading it longer than I have".
Okay, make that some decades.

We and the poster of our second link below were paying attention to the Indian gold market last winter when it was just a parochial issue between she, me and a billion Indians, more after the (second) jump.
Now the story has moved far beyond the shiny stuff to the whole economy.

A Reuters exclusive:
India is considering a radical plan to direct commercial banks to buy gold from ordinary citizens and divert it to precious metal refiners in an attempt to curb imports and take some heat off the plunging currency.

A pilot project will be launched soon, a source familiar with the Reserve Bank of India's (RBI) plan told Reuters, although the idea was met with some scepticism.

India has the world's third-largest current account deficit, which is approaching nearly $90 billion, driven in a large part by appetite for gold imports in the world's biggest consumer of the metal. That has played a major role in driving the rupee to a record low.

With 31,000 tonnes of commercially available gold in the country - worth $1.4 trillion at current prices - diverting even a fraction of that to refiners would sate domestic demand for the metal. India imported 860 tonnes of gold in 2012....MORE
From FT Alphaville:

The golden rupee
The Indian rupee’s plunge continues.

As the FT reported on Wednesday, consensus opinion is that the weakness is connected to India’s growing current account deficit and unimpressive attempts thus far to bring it back to reasonable levels.

But Bloomberg on Wednesday alluded to another interesting connection: India’s attempts to suppress gold consumption. For, as the currency weakens in international terms, the greater the cost of gold also becomes for Indians. Indeed, as Bloomberg noted, the price of gold has now hit a record price in rupee terms, threatening jewellery demand in the world’s largest gold consuming country....MUCH MORE
Indian Central Bank Issues Guidelines on Dematerialized Gold in Effort to Reduce Need to Import Physical
As Indian Central Bank Restricts Gold Imports Spot Falls to a Three Week Low
Reserve Bank of India Launches Inflation Bonds to Reduce Demand for Gold
Largest (English language) Paper in Largest Gold Market: Time to Sell Gold Not Buy
As Indian Central Bank Restricts Gold Imports Spot Falls to a Three Week Low
"No Gold Rush in India After Latest Plunge"
Ahead of Hindu Holy Day Warnings on Gold Purchases and Discounts on Coins
"Chatter That India Will Ask IMF For Help"

And some good news:
The Astounding Decline in India's Birthrate